Even when the lender does finally take action it can sometimes be delayed by the court process so that the borrower ends up staying in the property for a number of years from when they first encountered financial difficulties.
Some repossessions can be delayed further by some lenders’ reluctance to repossess due to a potential perceived reputational impact or even customer vulnerability; but it doesn’t have to be like that.
Delaying the inevitable
If the property ultimately gets repossessed it is not good for either borrower or lender to drag it out for years.
For the borrower they have only delayed the inevitable, only they will now have incurred far greater debts than they would have done if the property had been repossessed more quickly.
At the same time the property is likely to have depreciated, as people in danger of repossession rarely spend time or money on maintaining their home.
This means that the property is worth less when it comes to sell, or it needs a lot of work done on it before the sale.
This is likely both to delay the sale and can mean the property sells for a lower price which will directly result in less money being returned to the borrower or their debts being higher.
Keeping someone in a property where repossession is clearly the ultimate outcome can be the wrong thing to do.
It can result in a stressful time for both borrower and lender with higher debts amounting.
Handled correctly it is possible to do things more quickly while finding the best outcome for the borrower.
Sitting down with the borrower face-to-face right at the beginning of the process and discussing their options is a great help.
Retain sale profit
Making sure that the borrower is aware of the repossession process and the outcomes is crucial – few borrowers realise that if their house is worth more at sale than the amount owed, then the additional money will be returned to them for example.
So many borrowers only realise this at the end of the process after their house has become dilapidated and they are potentially worse off as a result.
There are a number of options for people in arrears – repossession or sale are just two, but equity release is also an option for a growing number of older people, especially those with interest only mortgages who find they cannot pay off their outstanding balance.
If repossession is the only answer, putting off the inevitable is a solution that helps no-one.